[HALIFAX and FREDERICTON] — AIMS today released Following the Money Trail: Figuring out how large subsidies to business are in Atlantic Canada by UNB economist Prof. David Murrell. This study shows that recent claims that the business sector in Atlantic Canada gets fewer subsidies than businesses elsewhere in the country are not correct. In fact, when measured appropriately (and conservatively), business subsidies in the region range from 27 – 29 percent higher than the national average.
The notion that the Atlantic Canadian business sector was undersubsidized relative to the national average was based on Statistics Canada numbers that looked at business subsidies per person in 1998 (the most recent year for which data are available). But the number of people in a region is not relevant to the size of its private sector — Alberta has a very large economy but a relatively small population, whereas the reverse is true in Quebec, for example. To measure the degree to which business is subsidized, therefore, one must compare total subsidies with the size of the private sector, and not the population as a whole. Furthermore, it turns out that Statistics Canada includes agricultural subsidies in its numbers, but not many forms of subsidy to the fishery. This overweights subsidies in the West and underestimates them in this region. Finally, 1998 was not a representative year; a three-year average presents a more accurate picture.
Prof. Murrell uses two measures to determine the degree of subsidization of the private sector. First, he looks at business subsidies per private sector employee, leaving aside both agricultural and fisheries subsidies. Over the period 1996-1998, the average private sector employee in this region was subsidized to the tune of $819 per year, whereas the national average was $643, a difference of 27 percent.
The other measure studied was business subsidies as a percentage of private sector investment. Here again the same pattern holds true. Over the same three-year period, business subsidies measured in this way were 29 percent higher than the national average.
These trends are even more pronounced if one excludes business subsidies in the province of Quebec, whose provincial subsidies dwarf anything in the rest of the country, and heavily distort the national averages. Indeed, looking only at provincial (not federal) subsidies to business, Quebec’s $3.14-billion of such spending in 1998 was greater than the $2.28-billion spent by the nine other provincial governments combined.
Thus, if we compare non-farm, non-fishery business subsidies per private sector employee in Atlantic Canada from 1996-98 with the national average excluding Quebec, Atlantic Canada’s level of subsidization is 55 percent higher. Business subsidies as a proportion of private sector investment are 70 percent higher. (See the Appendix to the article for the data.)
Prof. Murrell draws no conclusions about the desirability of one level of subsidization over another. The purpose of his article is to correct a mistaken impression that may have been left in the minds of policymakers and the public about the degree to which the private sector is dependent on business subsidies in the Atlantic region.
For further information, please contact Brian Lee Crowley, President of AIMS, (902) 499-1998
David Murrell, UNB, 506-447-3207